Quick Facts

Namibia’s economic freedom score is 59.6, making its economy the 93rd freest in the 2015 Index. Its score is up by 0.2 point from last year, reflecting improvements in labor freedom, investment freedom, and freedom from corruption that outweigh declines in half of the 10 economic freedoms led by a significant deterioration in trade freedom. Namibia is ranked 10th out of 46 countries in the Sub-Saharan Africa region, and its overall score is below the world average but above the regional average.

Over the past five years, Namibia’s economic freedom has been on a downward trend, declining by 3.1 points, the third biggest score drop in the Sub-Saharan Africa region. Deteriorations have largely been concentrated in the management of government spending and trade freedom, which have declined by 15 points and 18 points, respectively.

Overall, Namibia’s progress toward greater economic freedom has been patchy. Open-market policies have been advanced only marginally, with layers of tariff and non-tariff barriers as well as lingering regulatory restrictions continuing to undercut productivity growth and impede diversification of the economy. The absence of an independent and fair judiciary weakens the rule of law and undermines prospects for long-term economic development. Corruption is pervasive, and the effectiveness of government services is poor.

Background

Namibia has enjoyed political stability since independence from South Africa in 1990. President Hifikepunye Pohamba won a second five-year term in 2009. The next elections are scheduled for 2014. Namibia benefits from good governance and a market-led economy. The economy is centered on agriculture, which is vulnerable to external shocks. It is also closely linked to South Africa’s economy, with the Namibian dollar pegged to the South African rand since 1993. There has been official pressure on white and foreign landowners to sell their property to the government so that “historically disadvantaged” and landless Namibians can be resettled.

According to an April 2014 Ernest & Young survey, nearly 80 percent of Namibian businesses view fraud and corruption as a significant risk to their operations. The rule of law remains weak, and access to justice is obstructed by economic and geographic barriers, a shortage of public defenders, and delays. Property rights are not protected effectively.

Namibia’s top individual income tax rate is 37 percent, and its top corporate tax rate is 34 percent. Other taxes include a value-added tax. Overall tax revenue is equal to 28.4 percent of the domestic economy, and public expenditures are equivalent to 38.3 percent of domestic output. Public debt equals approximately 27 percent of gross domestic product.

The regulatory environment is not conducive to business formation and operation. Launching a business takes 10 procedures and 66 days on average, and licensing takes over four months. The labor market is underdeveloped. Much of the labor force is employed in the public sector. Inflation remained high in 2013, spurred by a 13 percent increase in the tariff for bulk electricity.

Namibia, a member of the Southern African Customs Union, has a 6.9 percent average tariff rate. Government procurement policies can be challenging for foreign firms. Foreign and domestic investments are generally treated equally under the law. Limited access to credit and the high costs of financing impede entrepreneurial activity. Progress in modernizing the financial sector has been sluggish and limited.